Real estate experts blame higher inflation along with slowdown, irregular payment from customers, higher percentage of investors in the market and loan eligibility going down, for the liquidity crisis.
The reality of realty doesn’t augur well for the real estate industry in the city.
Inflationary pressure, higher interest rates and slowdown in economic growth has led to sluggish demand in the real estate sector. This has resulted into a severe liquidity crunch for the local developers as well. Although, developers from Gujarat don’t have huge exposure to credits from financial institutions, they are feeling the pinch as investors are not getting enough appreciation.
The residential market has been stagnant for a year and commercial market is yet to come out of sluggishness for nearly three years. The deep pocket developers in the city have been successful in holding the reigns till now, but barring a few, most have now started feeling the heat. “There is no doubt that there is liquidity crunch in the market. However, things are likely to improve in near future,” said Vijay Shah, a city-based developer.
In past few years, the realtors were able to weather the slowdown as they continued to enjoy liquidity comfort, believes, Sudhin Choksey, managing director of Gruh Finance. “Real estate has not seen big deals, but the realtors have already taken funds from financial institutions, and have been paying huge interest. The costs of funds are very high and that has affected their cash flow.
As a result, realtors are moving towards a scenario where they will face liquidity crunch. None of the known realtors are complaining about running out of cash, but the situation is not rosy for them any more,” said Choksey. Real estate experts blame higher inflation along with slowdown for the liquidity crisis. “Due to persistent higher inflation, people’s affordability has been severely affected. Moreover, loan eligibility has also gone down,” said one of the real estate developers of the city.
He added that barring a few good developers, none have been able to register sales growth in last three-four months.
Moreover, developers are not getting regular payment from the customers but he could not slowdown the pace of construction, which ahs led to liquidity crunch, he said.
Moreover, the higher percentage of investors in the market has also added to the misery. Investors are ready to exist but they are not getting desired appreciation, so new transactions are not taking place in the market. Around 25,000 residential units are likely to be ready for possession within couple of months in the city.
However, these properties are owned by the investors and if they are not be able to exit the market, things will go from bad to worse, said a leading real estate consultant in the city.
“Developers should focus on end-users. They must maintain balance between investors and the end-users to keep the momentum going,” said Pravin Bavadiya, managing director of City Estate Management.
If sources close to the development are to be believed, developers have also started offering around 10-15% discount, but that does not seem enough for the end-users who are fighting tooth to nail to make both ends meet.
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